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Why Amazon Will Win

Its retail engine keeps humming, and
its ambitions feed the beast.

At first glance, Jeff Bezos's e-commerce giant looks like it would have a hard time stacking up against the other three. Amazon's profit margins are lower than that of Google and Apple, and as a business that depends on fulfillment centers, its capital costs are higher than purely digital enterprises. What it does have is Bezos's almost-Jobsian ability to anticipate what's next and invest in it early. Over the past few years, Bezos bet on e-readers and cloud outsourcing, and each has paid off. Kindle is the dominant e-reading platform, the iPod of the book world, and now it's poised to seize the market for low-priced tablets. The tablets will feed Amazon's thriving digital media businesses—not just books but movies, music, and apps—as well as make it even easier to buy almost anything through Amazon. Meanwhile, slews of hot startups—as well as the likes of Netflix and even Apple—rely on Amazon Web Services to help run their businesses.

At the same time, Bezos continues to invest in e-commerce, buying up any company that poses a threat to his empire (notably Zappos). Analysts predict that Amazon will hit $100 billion in revenue by 2015, 21 years after its founding. Walmart took 34 years to make that mark.

$900 Amazon Prime, the $79-a-year subscription service that gives customers free two-day shipping and access to movies and TV shows, creates Amazon addicts: In the year before a customer joins, he spends $400 a year, on average; in the year after, $900. Prime growth exceeds 50% annually.

Continue reading "The Great Tech War of 2012" >>

A version of this article appeared in the November 2011 issue of Fast Company magazine.